Demand remains stable, with an increase for the healthcare sector

• Despite downward pressure from the economy, overall market demand remained solid in the quarter. Demand growth was moderate in the Beijing Airport Logistics Park (BALP) and Tongzhou Logistics Park (TLP) submarkets, which outperformed others. Several new large-area lease transactions were completed in these two submarkets.
• E-Commerce, supply chain and manufacturing industries continued to account for about 70% of market demand. The Double Eleven and other e-commerce events drove demand for short-term leases in related industries. Additionally, Sinopharm, the dominant healthcare company, signed a new lease for 12,300 sqm in the quarter, which led to a significant increase in healthcare sector demand.

New projects mostly absorbed; market vacancy rate remains at 5.8%

• Three new buildings, with a total GFA of about 240,000 sqm, entered the market in 4Q22. 90% of the total area was pre-leased before officially entering the market, thus adding limited supply pressure on surrounding properties. The vacancy rate increased slightly by 0.4 ppts, to 5.8% in 4Q22.
• The market focus was on cold chain storage and ESG in the quarter. High-quality buildings tended to provide customised cold chain storage for tenants. Green building certification has become more attractive to landlords, with more projects applying for green certification. For example, Hanpu Beijing Airport Logistics Park obtained the LEED gold certification for green buildings from USGBC.

Market rent increases 4.4% y-o-y in 2022

• Overall rental growth maintained a modest growth trend in the quarter, rising 1.1% q-o-q in 4Q22. The quarterly growth brought the annual figure up to 4.4% at year-end. Compared with office and retail, logistics & industrial was the only sector to maintain rental growth in Beijing. 
• Solid demand offset pressure from new supply, keeping rents rising steadily throughout 2022. High-quality projects in major submarkets led rental growth. At the same time, low-priced areas, such as Pinggu district, also saw rental gains in 2022.

Outlook: New supply to reach a historical peak in 2023

• In 2023, 550,000 sqm of new supply is expected to enter the market. Of that, 60% will be near the Daxing International Airport area. The large-scale supply will bring a major change to the structure of Beijing’s logistics market, and a new submarket, Daxing International Airport, will be established in 2023. The vacancy rate is expected to be pushed up to 9.7%, an increase of 3.9 ppts from 2022. 
• Despite the supply peak, demand should still maintain a normal growth rate as before. Demand in supply chain, e-commerce, and manufacturing industries should continue to support the stable destocking pace of new projects, thus the logistics market should remain healthy in 2023. Rents are expected to grow at a slightly slow rate of around 3.8% in 2023.